Visa Inc. (V) Q1 2011 Earnings Report, Transcript and Summary

Welcome to Visa Inc.'s Fiscal First Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Jack Carsky, Head of Global Investor Relations. Mr. Carsky, you may begin.

Good afternoon, and welcome to Visa Inc.'s Fiscal 2011 First Quarter Earnings Conference Call. With us today are Joe Saunders, Visa's Chairman and Chief Executive Officer; and Byron Pollitt, Visa's Chief Financial Officer. This call is currently being webcast over the Internet and can be accessed on the Investor Relations section of our website at www.investor.visa.com. A replay of the webcast will also be archived on our site for 30 days. The PowerPoint deck containing highlights of today's commentary was posted to our website prior to this call. Let me also remind you that this presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements are not guarantees of future performance, and as a result of a variety of factors, actual results could differ materially from such statements. These include setbacks in the global economy and the impact of new financial reform regulations. Additional information concerning those factors is available in our last 10-K and the 10-Q and 8-K filings we filed with the SEC today. They can be accessed through its website, in the Investor Relations section of our website. For historical non-GAAP and pro forma related financial information disclosed on this call, the related GAAP measures and other information required by Regulation G of the SEC are available in the financial and statistical summary accompanying our fiscal first quarter earnings press release. This release can also be accessed through the Investor Relations section of our website. And with that, I'll turn the call over to Joe

Thanks, Jack, and as always, thanks to all of you for joining us today. Visa began fiscal 2011 with another very strong quarter, delivering net operating revenues of over $2.2 billion, a 14% increase over last year. As has been the case for several quarters now, these revenue gains were driven by double-digit growth in payments volume, cross border volume and Visa-processed transactions from across the globe. Net income for the quarter was $884 million, a 16% increase over the prior year. This equates to diluted earnings per share of $1.23, a 20% increase over the first quarter of 2010. As previously reported, early in October, we funded the litigation escrow by an additional $800 million, which has the same effect as the share repurchase. Later that month, our board authorized a $1 billion repurchase program, which we actively executed upon during the first quarter by buying over $300 million worth of shares. So we're off to a good start in terms of returning excess cash to our shareholders. Byron will provide more additional detail on the repurchase. Nearly one year ago at Visa's inaugural Investor Day, we laid out our long-term strategy that would drive continued revenue growth. Key to this strategy is maintaining a dual focus on growing usage of our core products, which drives the majority of our revenue today while simultaneously advancing an aggressive innovation agenda to accelerate long-term growth through new platforms and channels. During that same event, we also made a commitment to further diversify our business, including a long-term goal of ensuring our revenues more fully reflect Visa's global presence. We continue to make steady progress on achieving our aspiration of having more than 50% of revenue come from outside the United States by 2015. Consistent with that objective, in this quarter, just over 60% of total revenue growth came from Rest of World. VisaNet is the key asset that enables Visa to deliver on these innovations and revenue diversity commitments. As we invest in long-term growth initiatives, we will maintain the unmatched scale, reliability, security and convenience that we deliver today. Our competitive advantages in this regard are significant. VisaNet's processing infrastructure is unparalleled in its capabilities, enabling us to deploy those assets and drive more volume and more value to networks and its participants. Importantly, the flexibility of VisaNet allows us to lead the evolution of our industry towards payment into new technologies and form factors that will spur the future growth of this industry. To illustrate that point, I'd like to provide you with our most recent updates on key initiatives. First, we will look at eCommerce and Money Transfer, two critical channels to driving usage of our products. Growing our eCommerce business remains a top priority for Visa and will be an area of increased emphasis in fiscal 2011. Our investments in this category to date are yielding results as we saw 25% year-over-year growth in eCommerce payments volume globally in Q1. CyberSource enables us to accelerate growth of the eCommerce category overall by extending Visa's capability to deliver innovation to merchants, consumers and partners with services such as fraud management and payment security management. CyberSource got off to a great start in 2011, delivering 40% year-over-year growth in billable transactions in the first quarter. We have also made progress in driving future growth by continuing to expand merchant relationships with new wins such as Hertz and Tommy Hilfiger. We also signed up LAN Airlines thanks to a lead from our Visa LAC team that demonstrates the synergies that exist for building the business through shared lead generation. We've also begun making targeted investments to expand CyberSource's international footprint, including adding personnel to our existing office in Singapore, establishing a legal entity in Brazil and assessing the landscape in our CEMEA region. While the international build out will take time, we are excited about the opportunities for growth. Money Transfer is an example of our commitment to leading the evolution in payments, giving consumers a new channel to use their credit, debit and prepaid products. In fact, today, I'm pleased to announce substantial progress on that front. We have expanded our partnership with MoneyGram to introduce the first cash-to-Visa account program for remittances from the United States to Mexico, which according to the World Bank is the largest remittances corridor in the world. Utilizing the strength of our global network, this program allows consumers in the U.S. to visit any of the 35,000 MoneyGram locations to send funds directly to any Visa credit, debit or prepaid account in Mexico in a fast, secure, reliable and cost-effective way. Money Transfer holds significant potential for our business, both in the U.S. and globally. In addition to our strong partnership with MoneyGram, we are currently engaged with other leaders in the field to pursue additional opportunities. As a leader in product innovation, prepaid is an area where we will continue to invest and foster global growth. In the U.S., our efforts to support issuers of major government prepaid programs continue. With the Bank of America, we recently launched a significant prepaid disbursement card program for the state of California Employment Development Department. Additionally, the state of New York recently announced the launch of a Visa prepaid pilot program with Chase bank that will streamline how payments are made to parents receiving adoption subsidies. Adoptive parents now have the option to receive those funds through a Visa-branded prepaid card issued by Chase instead of receiving their funds by check. More and more, we see prepaid making a case for itself in every pocket of the globe and particularly, in emerging markets. This is true from Botswana and Georgia, two countries that recently partnered with Visa to introduce their first prepaid product solutions to India and Pakistan, which are further along the payments development curve. In India, Visa developed the payment solution for the Unique Identification Authority of India to support that country's massive national program to issue unique identification numbers to local residents. This program has the benefits of deepening our relationship with the State Bank of India, potentially growing the number of transactions on Visa's network and advancing our goal of financial inclusion for underbanked individuals worldwide. And in Pakistan, we are gratified to see the progress that has been made since we joined the government of Pakistan and United Bank Limited, Bank Alfalah and Habib Bank Limited to launch a national aid disbursement card program after last summer's floods. More than 1.4 million cards have been issued, delivering $317 million in humanitarian aid, one of the fastest rollouts of a disbursement program of this kind. All of us who have been reading the news have seen a clear build up of excitement and attention around mobile payments, and we absolutely agree. The convergence of payments with mobile devices is a significant development in the evolution of digital currency and a top priority for Visa. Visa's presence in mobile payments is already well established worldwide with 25 payment programs in 19 countries worldwide. We expect international markets will continue to be amongst the fastest adopters of this innovative payments technology. That said, we announced the commercial availability of mobile contactless payments in the United States and in other select markets. Last quarter, I said that we were standing on the threshold. And now for the first time in Visa's history, a mobile contactless payment solution is officially included in the list of Visa-compliant products available for use by our client financial institutions. Wells Fargo has joined Bank of America, JPMorgan Chase and U.S. Bank in piloting the technology with their customers. The solution works with existing contactless payment terminals installed at retail outlets worldwide, enabling Visa account holders to simply hold up their phone to pay for purchases. We recognize that the U.S. market is complex and will require an inclusive approach that addresses the specific needs of all stakeholders. However, I believe Visa's network and payment expertise offers significant competitive advantage over new entrants, and I'm confident that we will play a key role in the evolution of mobile payments in the U.S. Visa's presence in the mobile channel also offers opportunity to build deeper relationships with existing customers as well as connect new participants with Visa through value-added products and services. An example is our recent launch of the Visa Mobile iPhone application, now available as a free download from the iTunes app store. The application delivers customized discounts and is tailored to consumer's preferences and physical location, which enables merchants to reach consumers in a targeted way and gives consumers access to exclusive deals not available to other shoppers. Security is another area in which we are evolving and differentiating Visa through innovation. Just last month, we announced significant improvements to VisaNet security capabilities, which will dramatically improve our ability to detect and prevent global electronic payments fraud. By enhancing the underlying processing platform that powers Visa's advanced authorization offering, we are enabling our issuers to isolate fraudulent transactions from legitimate ones in real-time. And historical data tells us that this could help identify an incremental 29% of the global fraud annually. Not only is this applicable domestically but more importantly, in cross border applications, where you have higher incidences of fraud and so have greater levels of denied authorizations. Enhanced measures will allow for a greater number of transactions. It's often easy to take our reliable, secured global processing capabilities for granted. But the reality is that as technology enables new payment platforms and competitors, our processing excellence will differentiate and advantage us competitively. So in that regard, I'm pleased to report that we had a flawless peak season of transactions processing, which means that we achieved 100% success in authorizing and settling all transactions between Thanksgiving and New Year's Day. This marks the 18th year in a row that we have hit this mark. That captures some of our most recent highlights and there will be more to come. Overall, we believe that we are operating from a position of strength, fully utilizing our assets and points of differentiation. Our competitive advantages are significant and will continue to enable us to deliver the payment in commerce solutions that consumers and merchants want. Finally, I'd like to close with our thoughts about the recent legislative developments in the United States. With respect to the Federal Reserve's initial recommendations related to the debit provision of the Dodd-Frank Act, we believe the government is engaging in price mix into the benefit of virtually no one. The debit price control legislation has been policy and requires thorough review and revision before potential implementation. To that end, we're working with the entire industry to help the 112th Congress and the Federal Reserve better understand how the provisions create significant unintended consequences that will harm consumers, the economy and financial institutions of all sizes, even if those institutions were supposedly exempt from the regulation. Because of these threats, particularly the harm to the consumers, we believe Congress should re-examine the Durbin provisions and delay implementation to more carefully consider the complexities and unintended consequences of the provisions. Joint federal agencies should also provide an objective assessment of the impacts and present their findings to Congress for review and debate. We are encouraged by the increasing number of voices speaking up about the unintended consequences of this legislation, most notably the authors of the financial reform, Representative Frank and former Senator Dodd. We believe it is noteworthy that Representative Frank has indicated a willingness to work with those who are similarly concerned and amend the debit provisions to allow financial institutions to recover full costs associated with want running a reliable and secure debit network. I've never seen the industry, including banks of all sizes, this engaged and coalesced around working together to improve the outcome. We and others in the industry are looking forward to participating in Representative Bachus' proposed hearing on this legislation, currently planned for mid-February. As we have seen, the more this issue is debated, the more questions are raised about who will really benefit in the end. While we don't know yet the final rules, Visa is working aggressively to protect the interests of consumers and our clients, and we'll support the industry's activities to shape the legislation that impacts community banks, credit unions and larger banks alike. But no matter the ultimate outcome, I want to say to you that we remain confident in our ability to deliver strong revenue and earnings growth over the long term. We have developed a priority set of business strategies and are ready to deploy them when the law is finalized, allowing us to utilize our people and our assets to drive us successfully towards our goals. As you can appreciate, I think it's inappropriate to elaborate further on these strategies at this time for a host of reasons. And now over to Byron.

Thank you, Joe. I'll begin with some overall observations. Our business results reflect continued positive economic momentum, which remains global in scope. We saw solid worldwide growth driven by increases in cross-border travel and healthy gains in both credit and debit payment volumes. Now let me quantify these trends. First, I will cover our global payment volume and transaction trends for both the September and December quarters, as well as payment and transaction results for the first four weeks of January. Following the review of our revenue drivers, I'll cover the financial highlights of our fiscal first quarter, followed by guidance updates for fiscal year 2011. Global payment volume growth for the September quarter in constant dollars was 14% and improved slightly in the December quarter to 15%. We saw the following breakdowns in December quarter figures. In the U.S., payment volume growth was 12%, down slightly from 13% in the September quarter. Rest of World payment volume on a constant dollar basis grew at 17%, up two percentage points from the 15% rate in the September quarter. More recently, through the 28th of January, U.S. payment volume growth moderated to a positive 10%. Although not yet available, we expect Rest of World payment volume growth to be significantly higher. Global cross border volumes delivered a healthy 15% growth rate on a constant dollar basis in the December quarter as the world continued to travel. And more recently, through the 28th of January, cross border volumes on a constant dollar basis sustained momentum with a 16% rate of growth. Transactions processed over Visa's network totaled $12.6 billion in the fiscal first quarter, an increase of 15% over the similar period a year ago and just slightly behind the 16% growth rate we saw in the September quarter. Through the 28th of January, processed transactions stayed the course, posting growth of 14%. CyberSource billable transactions totaled $987 million for the quarter, a very strong 40% growth rate. We expect continued strength in this part of our business as eCommerce activity continues to grow both in the United States and internationally. Now turning to the income statement. In our first fiscal quarter, gross revenues of $2.6 billion were up 13% from the similar period in 2010. Net operating revenues in the quarter were $2.2 billion, a 14% increase over the first quarter of 2010, driven by a sustained economic recovery, ongoing sectoral growth and better-than-anticipated cross border transaction. Moving to the individual revenue line item. Service revenue was just over $1 billion, up 22% over the prior year period. This is reflective of strong payment volume growth in the quarter ending September and the impact of pricing adjustments. Data processing revenue was $844 million, up 10% over the prior year's quarter based on strong processed transaction growth rates for both Visa-processed and CyberSource transactions. As expected and discussed previously, data processing revenue growth was moderated by the impact of key contract renewals last quarter and by the prospective removal of certain offsetting gateway pass-through revenues and expenses. International transaction revenues were up 14% to $630 million due to the sustained improvement in cross border volumes during the period. Client incentives as a percent of gross revenues came in at 15%, a little lower than our guidance but on track with expectations. We still expect client incentives to be in the range of 16% to 16.5% for the entire year. Total operating expenses for the quarter were $872 million, up 17% from the prior year, driven by the incremental expense from the acquisition of CyberSource as well as the non-recurrence of our prior year onetime benefit of $41 million associated with the prepayment of the retailers litigation. Additionally, remember that we announced an earnings-neutral change in income statement presentation related to revenue and operating expense associated with certain pass-through activities. As a result, $67 million of revenue and expenses, which were booked in Q1 fiscal year 2010 will not re-occur in Q1 fiscal year 2011. In the first quarter, this represented four percentage points of revenue growth. For the remainder of the year, these changes in presentation will continue to be earnings neutral and will impact revenue growth. The foreign exchange impact on net revenue in the first fiscal quarter was moderated by our hedging activity and contributed a positive 1% increase compared to the same year period. While our operating margin for the quarter was 61%, please note that we expect to aggressively fund necessary long-term investments across our entire business. One callout on depreciation and amortization. While the CyberSource acquisition added $22 million of incremental depreciation and amortization expense for the quarter, as an offset, beginning this fiscal year, we no longer recognize the $17 million in quarterly amortization for the asset step-up that was applied when we first merged in 2007. This step-up became fully amortized at the end of September 2010. Capital expenditures were $75 million in the quarter, representing ongoing investment in technology, infrastructure and growth initiatives. Moving on to the balance sheet. We ended the first quarter in great shape with negligible debt and cash, cash equivalents, restricted cash and available-for-sale investments of $6.5 billion. Of this total, $2.7 billion is restricted cash, which represents amounts sufficient to fully pay out the balance of the American Express settlement over the remaining five quarterly payments with $2.3 billion uncommitted as of the end of the first quarter. As Joe mentioned earlier, during the quarter, we effectively repurchased approximately $1.1 billion of Class A shares at an average per share price of $72.08. This resulted in the lowering of our outstanding share count by 15.3 million shares, taking us to 713 million on an as-converted basis at the end of the fiscal first quarter. Management remains committed to returning excess cash to shareholders. Accordingly, we will continue to be active buyers of our shares in the future at prices that align with our long-term view of the value of our shares. At the end of this fiscal quarter, $694 million of open-to-buys still remains from the $1 billion authorization approved in October. Last week, we announced the early release of all remaining locked up Class C shares. This means 55 million shares will become eligible for sale on February 7, a month and a half ahead of the prescribed unlock date of March 25. All Class C shares sold in the public market after this date will automatically convert to Class A shares. As a reminder, the release does not increase our outstanding share count nor is there any dilutive effect. In order to broaden our participation in the Brazilian prepaid market, we recently announced the sale of our 10% stake in Visa Vale issuer, CBSS to Banco do Brasil and Bradesco. CBSS will continue to issue Visa Vale prepaid cards in Brazil. Visa's gross proceeds from the sale are $103 million. Upon regulatory approval, we will recognize an estimated pretax gain of approximately $85 million net of transaction costs, and we'll record the event in investment income. The amount of the gain, net of tax, is estimated to be approximately $44 million. As for our guidance for 2011, given the results to date and little incremental clarity from the recent initial Fed rule-making, we have no changes from our prior outlook. As evidenced by our stock buyback, we remain optimistic about Visa's growth prospects over the long term. Once the final rules have been promulgated by the Fed, we will be in a better position to share with you our views on the financial impact to Visa in 2012. And with that, we are ready to take questions.

[Operator Instructions] The first question comes from Tim Willi with Wells Fargo.

I was wondering if you could just talk a little bit about Money Transfer and how you sort of see your expansion plans, not only geographically, but if you'd also shed any light on sort of the economics that are shared between you and future Money Transfer partners. How do you think about that occurring as the business opportunity evolves?

Well, I think we've mentioned pretty succinctly the arrangement that we have with MoneyGram, and much of the revenue that we generate out of that comes through the transactional volume on our cards, both at the front and the back end of the transaction. Beyond that, Money Transfer is an integral part of our mobile strategy or our mobile technology strategy, both domestically and outside of the United States. I think that money transfer takes on different forms, depending on what part of the world it occurs in. The transactions or the cards that we provided in Pakistan are a good example of how something might be manifest. Some of the things that we are beginning to think about doing in India also would embrace that notion. As it relates to our financial arrangements between various different parties from a Money Transfer point of view, I think I'll decline to comment on that at this point in time, but we are excited about the notion of money transfer and how it will fit into our nook going forward.

The next question comes from Bob Napoli with Piper Jaffray.

As far as your goals for 2015, over 50% of your revenue international, looks to me like -- I mean, are you progressing faster than you thought? It looks -- I mean your revenue, your payments volume is down to 55%. Now U.S. actually down 200 basis points just quarter-over-quarter, and it looks to me like you might get your payment volume under 50% in U.S. maybe in one year to a year and a half. So are you progressing faster? And what is the difference in the revenue yield on the U.S. and international?

Well, there are differences in our yields around the world, depending on what business we're in in various different geographies. Having said that, I mean as it relates to your question, I think we have a goal out there. I think we're well on our way to meeting that goal. We might get it done a little bit faster. Remember, I've talked about country acceleration strategies, and we're doing much better in Brazil and Russia than we had thought we'd be doing. We think that the same thing will happen in Japan, and we're looking at several other countries right now. I can't bring that all together as succinctly as you might like and say, "Hey, we're going to have more than 50% of our revenue coming from outside the United States in two years or a quarter, three years." But we are well on our way to getting to that point, and let me re-emphasize what I said in the comments. And that is that 60% of our growth in the past quarter came from -- revenue growth came from transactions outside the United States.

The next question comes from Jason Kupferberg with UBS.

Joe, just wanted to pick up on some of the comments you made around what's going on in Washington and just to get your sense if there is truly a genuine effort within Congress to pursue legislation that would actually change the language of the Durbin amendment. And absent that type of legislation, do you feel that the public comment period and lobbying by various folks on the Hill would be enough to try and make the final version of the rules much less onerous on the industry than the initial proposals? Because it seems like the Fed kind of came out December 16 and said, "Hey, it doesn't really matter whether we like the Durbin amendment or whether it makes logical sense." They're simply charged with writing rules that implement the language and intent of the amendment, and they kind of said, "Hey, our hands are tied." So I just wanted to get a sense from your vantage point, is the approach here to really push the legislative path to try and actually get the language of the amendment changed as opposed to just work kind of softer lobbying channels, which was kind of done back in November and December and at least, as it relates to the initial proposals, didn't seem to have a big impact on the Fed's initial decision making?

Well, I learned in November and December that it is foolish to try to predict exactly what Congress will or will not do. Having said that, I think I lean towards agreeing with you as it relates to the Fed and what they are able or not able to do. And while I don't think that dialoguing with the Fed or sending opinions or commenting about what's already out there, as we are supposed to do, is over and while I don't necessarily believe that some things can't be changed at the margin, I would say that the focus would be the Congressional focus at this particular time. And our position as well as I think every other financial institution in the United States is that the enactment of this legislation should be delayed and the unintended consequences should be studied, and it should require some action to reinstate or to bring into that anything associated with this amendment predicated on the findings of that study.

The next question comes from Adam Frisch, Morgan Stanley.

The question we get a lot is around the fiscal '12 guide. And while you were able to give the fiscal '11 outlook, which theoretically includes one quarter of the Durbin impact, but not a view on fiscal '12. So Byron, my question for you is can you provide at least some color on the influences to the P&L in 2012 as a result of the regulatory activity?

Our view has been from the beginning that when we guide to 2012, we would like the benefit of being able to interpret the rules that the Fed has promulgated and to put them into the context of the mitigation strategies and our go-forward strategies in the debit arena that we have crafted knowing that once the rules are clarified, we will know which ones are relevant. We'll be able to much better size the impact by line item and be able to give to all of you much more thoughtful guidance than we would today, which would be largely speculative. And so until the rules are clarified at which point we'll be able to -- we'll be much more open about what our competitive strategies would be at that time, we're going to defer at least another quarter before we address 2012.

Having said that, we've repeatedly suggested, by buying back our own stock and by publicly making comments, that we believe that Visa will survive and be a very viable growth company in the future, regardless of the outcome, the specific outcome of the legislation. But the specifics of that and the timing of what happens and how things may or may not happened really is, as Byron said, pretty dependent on what the final outcome of everything is currently happening becomes. I will remind you that the majority of our growth in the past quarter did not come from the debit card business. Much of it came from outside the United States and from other initiatives that we have within the United States. And I'll remind you that the debit business is about in the neighborhood of 20% of our total revenues. So I, again -- and of course, without being specific, we're not going to lose all that business under any circumstances. So you're going to have to think about it in your own terms, but we are excited about Visa's future, and we'll be specific about how excited we are when we have a framework in which to communicate it.

The next question comes from Tien-Tsin Huang, JPMorgan. Tien-Tsin Huang - JP Morgan Chase & Co: Kind of as a follow-up to what Adam just asked, I saw in the 10-Q that you know that it's going to be possible to mitigate the negative impacts from the Reform Act. And I'm curious, are these mitigation efforts going to come from primarily diversifying away from the U.S. and growing the international business like you just talked about, Joe? Or do you have a game plan in place in the U.S. to, I guess, reinvent the business model, particularly in debit? I'm not really looking for details. I'm just trying to rank the two in terms of priorities as we think about modeling the midterm -- the longer-term outlook for Visa?

Well, certainly, not all of our mitigation efforts will be focused on increasing our revenue outside the United States, although that is and has been, even prior to Durbin, one of our primary objectives, and it's an important part of who we will be in the future. But there are mitigation efforts that we will back against the business in the United States. And as we've just said, I mean, I'm not going to go into detail, but we're not going to turn our back on the United States. And we expect to grow revenue and develop our business whatever the outcome of the legislation is.

The next question comes from Julio Quinteros, Goldman Sachs.

Byron, real quickly, just on the expense side, a little bit higher than what we were looking for here on the personnel side. Obviously, it looks like you guys have the inclusion of the CyberSource stuff and talked a little bit in 10-Q about having some additional headcount. And then on the other line item, I guess if you could also address the G&A side with a comment about the reserves for potential government assessment? How big is that? And is that a recurring item? Or it was just a onetime item?

Yes. So on the personnel side, the major callout is we are lapping a quarter in which we did not have CyberSource. So we are -- that's the single largest component being added to the personnel line year-over-year. And then in addition to that, we are actively staffing our growth initiatives outside the United States. And so as we continue to put more boots on the ground to drive and accelerate revenue growth outside the U.S., you're going to see some of that in the personnel line, which will be somewhat amplified by the weakening U.S. dollar. So you are seeing some foreign exchange impact in that line as well. With regards to the G&A line, there are always going to be some factors that are non-recurring that are adjustments to certain reserves. That's the line item that it appears in, and this quarter, part of that explanation is non-recurring accruals related to those matters.

The next question comes from Rod Bourgeois with Bernstein.

Turning away from the Durbin amendment stuff, can you give us an update on the latest status on the merchant litigation case in the Brooklyn court? And can you give us any thoughts on how to dimension the possibilities for a settlement and what forms the settlement might take?

Well, unfortunately, the answer is no. I can't answer any of those questions. Obviously, the litigation continues, and there are conversations. But beyond that, I really would be foolish to say anything else.

If I could just add one comment, actually, to Julio's prior question. Julio, the G&A also is impacted by the addition of CyberSource. So literally, all the line items in the P&L are being impacted by the pickup of CyberSource expenses. So that's another important driver of that line.

The next question comes from Bruce Harting, Barclays Capital.

I guess we agree with your position on the Durbin legislation and on unintended consequences, but in the event that the Fed rule stands as is and they extend the exclusivity issue to signature debit, what are the technology difficulties? Or what would you be lobbying to the Fed right now in argument of not extending to signature? And indeed, I mean, it looks like there's only two networks able to provide that, correct? So wouldn't that just solidify the strength of the oligopoly that they're worried about policing? And who pays the cost to change the cards? Would that be incurred by the banks? And how long would it take to implement that change? Would it take -- would that be something that could be turned around by the banks in terms of reissuing new cards with two networks within a month? Or is that a six-to-12-month issue? And is it true that the merchant acquirer decides on the routing anyway? And wouldn't they be incentivized to go with -- to stick with you, since many of the merchant acquirers are your customers currently and would want to get the discount?

Well, I mean you've asked a lot of extraordinarily good questions and therein lies the dilemma. I mean, everything you said is reasonably accurate. We are in a very good position, and regardless of what happens, I don't think you're going to see any kind of an overnight deterioration. And I think you're obviously going to see us doing everything that we can to be the network of choice, and I think that there are many compelling reasons that we can put forth that will help us secure that position. And whatever happens, we look forward to using our people and our assets, which we believe in this regard are second to none, to make sure that we come out ahead of the game.

The next question comes from Jim Kissane, Bank of America Merrill Lynch.

Byron, can you give us a sense of what portion of your U.S. revenue is from issuers and what portion is from acquirers? Again, just on the U.S. side.

Jim, for some time, it has been plus or minus, roughly equal, plus or minus. It has not materially changed when we first talked about that. I think it was about a year ago. It might be a bit more. If I were to round it, we would round it a bit more to the acquirer, but there's been no material change since we first voiced that ratio about a year ago.

The next question comes from Craig Maurer, CLSA. Craig Maurer - Credit Agricole Securities (USA) Inc.: I wanted to follow up on your discussion of Mobile. Considering we are likely to see the likes of Google and Apple come out in a big way supporting contactless payments this year, how do you expect or how do you envision re-terminalization to occur? Do you expect there to be subsidies to get merchants involved, who will likely be offering those subsidies? And will we see the tone of Visa's marketing in the U.S. change to support some of the issuers that are trying to roll this out?

Well, Visa is in support of chip technology and on a global basis. Timing of when it will occur and how it will occur is still somewhat questionable, particularly in the United States. I think that the current state of affairs between the Card Act and the Durbin amendment has stopped some issuers as it relates to whether they want to invest and how do they want to invest. I don't think that there's any magic wand that is going to automatically make a contactless chip terminals or contact chip terminals automatically appear in an overwhelming way in the United States. I think that that will indeed take some time, and I think most issuers and even merchants believe that to be the case. I'm not certain, but I actually think there are somewhat fewer contactless terminals today than there may have been a year ago. So we've got -- there are issues in that regard as it relates to standards, chip standards. There isn't one contactless chip standard around the world and so all of this has to be reconciled before it becomes -- we become a country, where people walk around with cell phones and just automatically walk into face-to-face merchants, swipe their cell phones on a contactless. That being said, there is an inextricable momentum to mobile technology and contactless chips that is beginning to occur, and it will manifest itself over some period of time. We are extraordinarily involved in those efforts, and things that we are doing in that regard will become apparent as each quarter goes on. And we're reasonably confident that we have invested the right time and effort and capital into taking our business in the appropriate direction.

The next question comes from Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.: Just model related, Byron, on that personnel color that you provided, so that delta year-over-year, is that something we should extrapolate for the remainder of the year across the quarters? And then you mentioned rebates kind of coming in within the same range you guys had articulated. That would suggest that the next three quarters' run rates are probably going to be higher than what we saw in the first quarter, obviously. Is there any kind of seasonality that we should expect within that trend?

Yes. So on the first one, with regards to personnel, as you readjust your models for that line item, it would make sense to look at the fourth quarter of last fiscal year recognizing that we integrated CyberSource and I think the last two months of the quarter. So you should see a beginning step-up in personnel expense the next quarter -- so the quarter just completed, that's reflective of what you should be thinking about going forward, recognizing that there's always going to be some degree of lumpiness in personnel as we make various accruals, but we would suggest keying more off the first quarter. As it relates to our word, our expression is client incentives. I think another company uses rebates. With regards to client incentives, this is -- as we've talked about historically, this is a category that tends to be a bit lumpy quarter-to-quarter based on when certain contracts are signed, when renewals are signed. And so rather than seasonality, let's use it's a bit lumpy, and therefore, we came in a bit lower than our full year guidance in the first quarter. Therefore, you should see some -- in future quarters, we would expect it to come in a bit higher to average out to somewhere between 16% and 16.5% on a full year basis.

The next question comes from Chris Mammone with Deutsche Bank.

Just a question on Rest of World credit volume. Nice pickup in the most recent data, so just wondering if you had anything to call out there, just what you see what's sort of driving that net solid growth rate.

So on Rest of World credit volume, looking at it on a constant dollar basis, it has been pretty steady -- again, on a constant dollar basis, pretty steady double digits, mid-teen double digits through 2010, and January picked up a little bit, but that's -- no, the first quarter picked up a little bit. So it looks like very sustained positive momentum. Our transaction volume is picking up. Our processed transactions are picking up outside the United States, so that's encouraging. And the cross border travel outside the United States has remained very, very healthy. So with January, a pickup over the first quarter levels by a couple of points. So from that standpoint, the economic momentum for Rest of World appears very solid, very sustained, both from a domestic standpoint and from a cross border standpoint.

Next question comes from Bryan Keane, Credit Suisse. Bryan Keane - Crédit Suisse AG: I guess just two questions. I guess first, do you have any indication from Washington that getting the Durbin amendment delayed is a realistic outcome? Meaning, is there some real legs behind this right now? And then secondly, just on mobile payment, how will the economics change with the new competitors getting involved like Apple, Nokia, Isis and others? Or do you think the economics of Visa, like they have in the physical world, will be the same in the mobile world?

I can't predict what Congress is going to do. I can remind you that there is significant effort that is going on that is embraced by large banks, mid-sized banks, small banks, credit unions. I think that you will see some reaction from consumers, because in our opinion, consumers have been thrown under the bus in this legislation. And so in that regard, I would have to think that through some of the conversations we've had and because it is the right thing -- and I want to emphasize, it is the right thing. We're on the right side of this issue. I'd like to think that something will happen. I would like to think, as I said earlier, that it will take the form of a delay in the implementation of the legislation until the unintended consequences can be better assessed. But I can't promise you that. I can't tell you that I've had secret conversations with anybody and that this is a [indiscernible] (1:03:14), because none of those things would be true. So now that I've answered that, I forgot the second part of -- Mobile. That's an interesting question. But when you look at mobile technologies, as I said just a few minutes ago, I mean, it's coming or it's here. However, you want to define it. It makes it easier for people to shop. It opens up new avenues of things that may be purchased through your wallet, and there are a lot of technology companies that have significantly positive offerings and capabilities in this regard. Visa also has significant capability. We still have VisaNet. We still have a whole processing infrastructure. There are still 1.8 billion cardholders around the world, and we have been vigorously looking at and working on the technology. And we think we're going to be in a very good position as it relates to the evolution of mobile technology in the electronic payments business. I think that it will afford us some revenue opportunities that we currently don't have, and I think that will be a very positive thing. Will it change some of the other economics we have? I mean, it could. It could, but when we look at the overall landscape, we are comfortable that this is a positive thing for Visa and will be a positive thing going forward. And remember, we've talked to these other entities that you're referring to, and they do need some of the capabilities that we'd have, or they're either going to have to provide them themselves, or they're going to have to come to somebody like us to get them. And so there are compelling reasons for partnerships to occur. A significant -- even when you look at somebody like PayPal, let's not forget that a significant amount of their business is driven through Visa, MasterCard, and that isn't about to change in the near future. And I know that's not totally analogous to mobile technology, but I think that what Visa has put together over the years is very compelling as it relates to what it brings to the party from a speed or reliability or privacy and a security point of view. I don't think we're going to let that go.

Jose, we have time for a final question.

The final question does come from Glenn Greene with Oppenheimer. Glenn Greene - Oppenheimer & Co. Inc.: Just for Byron, the services yield went up pretty significantly, Q-to-Q. I think you alluded to a pricing change in the quarter. Does that account for the whole differential on the yield? And is it a sort of a sustainable yield level going forward?

That is the primary driver, and that would be sustainable going forward.

All right. Thank you all very much for joining us today. If anybody has any follow-up questions, feel free to call Investor Relations. Thank you.

This does conclude today's conference call. You may go ahead and disconnect at this time.